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precipitating the financial meltdown, the value of open interests had declined by about 50% and the price of oil had fallen over 50%. By the end of the year, oil prices were below $40/barrel, a decline of 75%. The annual averages for trading and prices for West Texas Intermediate Crude oil are described in the following table and analyzed in detail in the report. Annual Average West Texas Intermediate Crude Oil: Trading (Average Open Interest) and Price (Average Future Contract 1) Period Open Oil Price Interest $/bbl (Million bbl) 439 486 542 609 817 1064 1394 1377 1174 1191 1338 1526 $26 26 31 41 57 66 72 114 82 62 80 96 Total Value of Open Interests Billion $ $11 13 17 25 47 70 100 157 96 74 107 147
2001 2002 2003 2004 2005 2006 2007 2008 Jan.-July 2008 Aug.-Dec. 2009 2010 2011 Through Sept.
Commodity Futures Trading Commission, http://www.cftc.gov/MarketReports/CommitmentsOfTraders/Index.htm Energy Information Administration, Cushing Crude Future, contract 1, http://www.eia.gov/dnav/pet/pet_pri_fut_s1_d.htm
That is a classic bubble, Cooper said, but Federal regulators moved slowly to make permanent changes in the rules governing oil trading, so the bubble began to reflate in late 2010. The value of open positions has doubled in the past two years, while U.S. demand has continued to decline and global demand remains flat. Speculation has pumped the price of oil up again, putting the brakes on economic growth. We have been hearing a lot of over-heated rhetoric recently about job-killing regulations, Barb Roper, CFAs Director of Investor Protection, said. This report provides a timely reminder that it was weak regulation that landed us in our current economic mess, and it will take a strong policy response to restore the economy to health. Restraints on excessive speculation are just one component of that policy response, but they are a necessary component. The complete report is available at www.consumerfed.org/pdfs/SpeculationReportOctober13.pdf
The Consumer Federation of America is an association of nearly 300 nonprofit consumer organizations that was established in 1968 to advance the consumer interest through research, advocacy, and education.